Market Matters Summer 2018

Holding house keys on house shaped keychain in front of a new home Print publication


In this regular feature, Banking Litigation Associate Rachel Elgar will provide updates and commentary on trends and issues in the UK property market.

Halifax’s house price index for July 2018 indicates that the average house price has hit a new record high of £230,280, representing an increase of 3.3% against the same period a year ago.

Overall, however, the market picture is similar to recent periods.

Sales of homes in the UK fell by 3% to 93,340 in June. The volume of residential transactions has been flat over the last year and indications are that this is likely to remain so in the coming months.

Bank of England figures indicate that the number of new mortgages approved grew slightly to 66,000 in June 2018, although the growth rate for mortgage lending remains unchanged at 3.2%, and has remained stable at around 3% since 2013.  Growth therefore remains weak compared to pre-crisis periods.

In July 2018 figures published for UK Finance indicate that 390,200 homeowners switched product with their existing mortgage provider in the first quarter of 2018, representing £53.7bn of mortgage debt refinanced internally. These figures support UK Finance’s view that consumers are engaged and the majority switch to new deals shortly after their previous deal expires, but chose to stay with their existing lender.

In August 2018 UK Finance also reported that the number of mortgages in arrears of 2.5% or more of the outstanding balance, 76,740, has reduced by 8% as against the same quarter of 2017.  1,060 homeowner-mortgaged properties were taken into possession in the second quarter of 2018, 5% fewer than the same period in 2017, so arrears and possessions continue to remain historically low.  However UK Finance points to recent base rate rises and the low uptake of the Support for Mortgage Interest (SMI) loan as indications that arrears may “creep up” in the near future, although as 90% of new loans are being taken out on a fixed rate basis, the interest rate rise should not affect many newer customers.

Recent signs that growth in average earnings is now rising at a faster rate than consumer prices should go some way towards easing pressures on household finances and offset rising mortgage costs to some extent.

There some encouraging signs, but the market remains uncertain.